Lowell sitting on $6.4M in free cash

Lynch credits teamwork for surplus

LOWELL -- The state Department of Revenue has certified that the city finished last fiscal year with a $6.4 million surplus, its highest "free cash" figure since early last decade.

City Manager Bernie Lynch said Monday the city's fiscal 2012 surplus is further evidence of his administration's efforts in tandem with the City Council to improve Lowell's fiscal picture. Surpluses at the close of recent budget years have played a significant role in those efforts, he said.

Soon after Lynch became manager in 2006, the city had negative $2.2 million in free cash.

At the end of fiscal year 2010, the city achieved a $1.3 million surplus, and when the books closed on fiscal 2011, the surplus for that budget year was just upwards of $2 million.

"The $6.4 million is very good news and reflects the budgeting practices we have put in place to stabilize the city's finances," Lynch said. "It is the best position we have found ourselves in for certified free cash since the early 2000s."

The manager said the free cash for the fiscal year stretching from July 1, 2011, to June 30, 2012, was a result of conservative revenue estimates that were exceeded, city departments not spending all the money allocated to them, and different one-time events.

Several city councilors on Monday said they were thrilled with the free-cash figure.

"This is great news and it shows Lowell is doing a lot of things right," said City Councilor Marty Lorrey.

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Lorrey said he supports the city using some of the money for pressing infrastructure needs in the city and the rest to increase reserves.

City Councilor Joseph Mendonca, the chairman of the council's finance subcommittee, also said he was pleased with the free-cash figure and believes that besides going into reserves, it could also be used for one-time capital expenses, such as road and sidewalk improvements.

Both councilors said one good reason for putting the surplus funds in reserves is because the potential of midyear budget cuts due to state tax collections not meeting expectations. Mendonca also said he is hopeful the free cash means more good news for taxpayers, which should see property taxes stay level this fiscal year.

"It indicates we are in good shape going forward so hopefully we can have another year with no tax increase," said Mendonca.

City Councilor Rodney Elliott said he hopes the money can be used to avoid tax increases, or even to offset the tax rate, though Elliott also said that with the state facing a budget shortfall, the city should be cautious with its free cash which may be needed to offset any cuts in state aid.

"My first inclination is that we should lower the tax rate," Elliott said. "We should give the people at home a break. They're the ones who paid these taxes."

The City Council is scheduled to discuss the free-cash figure with City Auditor Sheryl Wright tonight at its 6:30 special meeting with the auditor.

Lynch said he shares the goal of a zero percent tax increase in fiscal 2014, which begins July 1. The manager said he intends to ask the City Council to put the entire surplus into the city's flexible stabilization fund.

Doing so will increase the city's reserves to $14.5 million, which includes $10.3 million in stabilization and $4.2 million in a state-mandated reserve fund. Increasing the city's reserves has helped Lowell improve its bond rating to A1.

Lynch said he is thrilled the city has been able to boost its reserves and improve its bond rating, while at the same time increasing the gap between what the city has levied in property taxes and its levy limit. The city had just under $5 million in excess levy capacity four fiscal years ago, and that figure is expected to increase to $9.2 million in fiscal 2013 with the city's plan for holding property taxes level this year.

"What it is showing is the commitment we made back in the first budget that we would build reserves through free cash or stabilization while holding the line on taxes," Lynch said.

Because of the mild winter, the city did not have a snow-and-ice removal deficit to cover with surpluses from other departments, a deficit that often is in the millions of dollars. Instead, the city saw close to a half-million-dollar surplus in its snow-and-ice account, said Lynch.

The city's surplus was also boosted by several hundred thousand dollars because of the cash reconciliation of the bank statements maintained by the Treasurer's Office and its cash book, which had not been fully reconciled since 1999.

Debt service produced a surplus of close to $750,000, and school electricity costs came in close to $1 million under budget.

Lynch praised Chief Financial Officer Tom Moses for his efforts, and lauded department heads for heeding the call to manage their departments in ways to try to produce savings.

The manager also said he expects more good financial news on the horizon.

The unwinding of the city's health-insurance trust fund, due to the city's switch from being self-insured to joining the Group Insurance Commission, is expected to bring a windfall to the city of "several million" dollars.

Lynch said he expects the trust fund to be closed out in the next few months and he plans to use the money from it to create a special reserve to pay for post-employment benefits for retirees, primarily health care. The city's liability for retiree health care is in the hundreds of millions of dollars.

"We will be the envy of many communities and it sets up the city very well for the future," Lynch said.

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